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ADT LLC v. Alder Holdings, LLC

United States District Court, S.D. Florida

September 11, 2019

ADT LLC, et al. Plaintiffs,
v.
ALDER HOLDINGS, LLC, et al., Defendants.

          ORDER ON POST-TRIAL MOTIONS

          ROBIN L. ROSENBERG UNITED STATES DISTRICT JUDGE.

         THIS CAUSE is before the Court upon Defendant Alder Holdings LLC's Renewed Motion for Judgment as a Matter of Law on Counts II and III and Renewed Motion for Judgment on Partial Rulings on Count I [DE 416], Alder's Motion for a New Trial and for Remittitur [DE 417], and Plaintiff ADT LLC's Motion to Amend Judgment [DE 420]. These Motions have been fully briefed. The Court has reviewed the Motions and the record and is otherwise fully advised in the premises.

         In its Renewed Motion for Judgment [DE 416], Alder challenges ADT's entitlement to royalty and punitive damages. The Court previously addressed and denied Alder's Motions for Judgment on these two issues. See DE 383; DE 410 at 127-28; see also ADT & ADT U.S. Holdings, Inc. v. Alarm Prot. LLC, No. 9:15-CV-80073, 2017 WL 2212541 (S.D. Fla. May 17, 2017). For the reasons previously stated on the record, Alder's Renewed Motion for Judgment [DE 416] is denied.

         In its Motion to Amend Judgment [DE 420], ADT argues that there is manifest error because it lacked an opportunity to present evidence against Adam Schanz on the contempt claim and because the Court failed to make sufficient findings and conclusions as to the contempt claim when entering judgment in favor of Schanz. However, ADT stipulated before the trial that the contempt claim would be tried to the Court simultaneously with the claims tried to the jury. DE 341 at 5. ADT stated during the trial that it had introduced all of its evidence to support the contempt claim and that the record was complete. DE 410 at 199-200. The Court then granted Alder's Motion for Judgment in favor of Schanz, which had sought judgment “on all counts” and to which ADT had an opportunity to respond. DE 350; DE 351; DE 410 at 214-18. The Court determined, in part, that ADT had failed to put forth evidence of Schanz's actions during the relevant time period to support holding him directly liable. DE 410 at 216-17. ADT subsequently acknowledged that Schanz was no longer a defendant to this action. DE 366 at 2. Accordingly, the Court finds that there is no error that justifies amendment to the Judgment and ADT's Motion to Amend Judgment [DE 420] is denied.

         Finally, the Court turns to Alder's Motion for New Trial and for Remittitur [DE 417]. In the Motion, Alder argues that it is entitled to a new trial based on numerous erroneous evidentiary rulings that affected its substantial rights and resulted in substantial injustice. The Court rejects Alder's challenges to the admissibility of the evidence for the reasons previously stated on the record. Moreover, where evidence was admitted for only limited purposes, the Court repeatedly gave the limiting instructions that Alder requested. See Gowski v. Peake, 682 F.3d 1299, 1315 (11th Cir. 2012) (stating that a jury is presumed to have followed its instructions).

         Alder's request for remittitur, however, warrants additional discussion. On a motion for remittitur, the Court must decide the maximum award the evidence could support. E.g., Frederick v. Kirby Tankships, Inc., 205 F.3d 1277, 1284 (11th Cir. 2000). Alder argues that the evidence fails to support the jury's award of $3 million in compensatory damages and $1 million in punitive damages. There has been much discussion in this case (and in a prior case, ADT LLC v. Alarm Protection LLC, 15-CV-80073, “ADT II”), on the subject of a damages-modifier. In ADT II, ADT took the position that in order for it to be made whole it would have to multiply its known damages by a certain factor to account for its unknown damages. ADT's position was grounded in the well-known principle in marketing that not every customer complains about a negative experience. ADT II, DE 379 at 15. Thus, ADT reasoned that (1) it could identify a certain number of lost customers who switched to Alder, (2) it could assign a loss amount to each customer, and (3) ADT could multiply the resulting calculation with a modifier to account for customers it lost to Alder that ADT could not find or identity, perhaps because the customers never complained about Alder's sales practices. ADT's usage of a damages-multiplier was supported by expert testimony and the Court permitted ADT to proceed with its theory in both ADT II and the instant case. At no time, however, did the Court rule on what an appropriate damages-modifier would be or whether there was a limit on the modifier that ADT could request from the jury.[1] The Court addresses that topic now.

         At trial, evidence was introduced that the actual amount of gross-revenue loss in this case (that ADT could prove) was in the vicinity of forty-six thousand dollars.[2] DE 409 at 200. Yet, at closing argument, ADT requested from the jury nine million dollars for lost revenue.[3] The gross revenue of Alder is sixty-six million dollars. DE 409 at 199. The forty-six thousand dollars in this case generated a damages demand equal to fourteen percent of Alder's gross revenue. While various factors, assumptions, and computations played into ADT's damages demand, the greatest factor was ADT's request to the jury to multiply its known damages by a factor of 25. DE 411 at 54. This factor, 25, was based upon ADT's contention that only four percent of its customers would complain about the willful, deceptive practices employed by Alder in this case (1 ÷ 25 = 4%).[4] The Court turns its attention to ADT's expert testimony on this topic.

         ADT's expert testimony (concluding that only four percent of customers would complain) was primarily based upon a study known as the TARP study. E.g., DE 410 at 63. Two TARP studies were discussed at trial. The first TARP study (from 1976) analyzed how often consumers complain under a variety of different scenarios. For example, the study analyzed how often consumers complain when the dollar amount at issue is small and how often consumers complain when the dollar amount is large. Id. at 63-90. If a consumer lost at least fifty dollars, however, the complaint-rate in the study was eighty-eight percent, not four percent.[5] DE 410 at 64. On cross examination, ADT's primary expert on this matter (Mr. David Stewart), conceded that his proffered complaint-rate of four percent could not be found in the 1976 TARP study. DE 408 at 141-42.[6] Instead, Mr. Stewart stated that his four percent number came from a 1986 TARP study that looked at how often complaints were reported to senior management in a company:

Q: And you mentioned tip of the iceberg in connection with this consumer complaint behavior. Now that we have more of a concept, how does that fit into the TARP studies and the literature on consumer complaint behavior, Dr. Stewart?
A: One of the most robust finding [sic] in the TARP studies over four decades and across multiple industries is that only about 4 percent of complaints ever make their way to top management in an organization. There may be some people who complain to frontline personnel, the retail salesclerk, the installer or the service provider, but those complaints frequently do not make their way up to senior management.

DE 408 at 92 (emphasis added). The evidence in this case was not limited to “complaints” that “ma[de] their way to top management.” The evidence in this case was about all of the complaints and deceptive sales that ADT was able to locate through vigorous discovery. While Mr. Stewart cited a source other than the TARP study-a book-he conceded that his book citation contained no support for his proposition. Id. at 142.

         Mr. Stewart's testimony suggested that his four percent number was more focused on ADT customers who had any encounter with an Alder salesman (which would not result in a loss of ADT revenue), rather than customers who were defrauded into entering into a contractual agreement with Alder (which would result in a loss of ADT revenue). Id. at 101 (“[I]t is highly unlikely that the vast majority of ADT customers who were called on by Alder ever actually complained.”). Finally, Mr. Stewart conceded that in the present day it is far easier for a consumer to complain because, as compared to 1976 or 1986, a consumer can complain via e-mail, online chat, twitter, website, or text. DE 408 at 138.

         Pursuant to the studies that ADT's own experts relied upon, the chances of a consumer complaining about negligible matters are very low. By way of example, “when you buy chewing gum you do not complain.” DE 410 at 64. The essence of the TARP studies is that the chance of a consumer complaint is tied to the level of importance something has to the consumer. E.g., Id. Thus, when ADT opines that the chances of one of its customers complaining is four percent, ADT's position, then, is that the level of importance its customers would assign to Alder's actions in this case is akin to the level of importance of a deficient pack of gum. No reasonable juror could believe that-the contractual dollar amounts in this case[7] equate to roughly the cost of a wedding dress, a top-of-the-line computer, or a vacation getaway. Similarly, when ADT assigns a four percent complaint-rate to Alder's deceptive sales practices, ADT equates what a customer would feel, having been deceived into a multi-year contract containing termination penalties, with what a customer would feel when a pack of gum contains four sticks instead of five. No reasonable juror could believe that. Additionally, when ADT contends that its customers would be unable or unwilling to discover Alder's deceptive practices post-sale, resulting in the reduction of the complaint-rate to a mere four percent, no reasonable juror could believe that as well. First, the possibility that the customer would receive bills in the future from both ADT and Alder is high- both companies lock their customers into multi-year contracts with termination penalties and the arrival of two bills would alert the customer to the fraud.[8] Second, if the customer signed a contract with Alder the chances of ADT interacting with the customer at some point is also high and, at that point, the customer would realize Alder's prior deceptive sales practice. Third, many ADT customers testified that they were able to realize Alder's deceptive sales practice once the Alder agent left the home and they could review the Alder contract. Finally, ADT's reliance upon the probability of senior management being informed of a specific customer's complaint is almost entirely irrelevant-no reasonable juror could rely upon that metric to compute the damages-modifier in this case.

         What multiplier, then, did the evidence reasonably support? One reasonable interpretation of the evidence is that the chances of a customer complaining ranges from eighty percent to ninety- five percent. See DE 408 at 132. Using those numbers, an appropriate multiplier would be 1.25 to 1.05, a far cry from ADT's demand for 25. Ultimately, however, the Court need not ...


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